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How do I pay myself as the owner of a sole prop?

A sole prop is a business that’s owned by one person and managed by that same person. It’s the most popular structure folks use when they’re trying to start a company because it’s easy to set up and gives the owner total control.

Paying myself as a sole prop

If you’re a sole prop, the IRS sees you as self-employed. As a result, you would most likely pay yourself through something called an owner’s draw. A draw allows you to take money out of your business for personal use.

Unlike employee paychecks, an owner’s draw doesn’t deduct taxes. Instead, you’ll have to pay those taxes through your personal income tax return. Keep in mind that you may also need to pay estimated taxes throughout the year before you file your return. It’s always best to chat with an accountant to make sure you’re drawing the right amount and getting those taxes in on time.

This article provides general information and shouldn’t be construed as tax, benefits, legal, or HR advice. Rules and regulations may change over time and may vary by location. So, please consult an appropriately certified expert (such as a lawyer, CPA, tax advisor, licensed broker, or HR expert) for advice specific to your circumstances.

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